Crude oil is flowing back to the market through shadow tankers and alternative routes, yet downstream refining capacity gaps cannot be closed by logistics alone. In response, Goldman Sachs has sharply raised its 2027 diesel margin forecasts, locking in a "higher for longer" premium for diesel.

In its August 29 report, Goldman Sachs lifted its 2027 forecast for US diesel margins over Brent crude from $27 per barrel in its February projection to $63 per barrel, while raising its European forecast from $19 to $49 per barrel, more than doubling both estimates.

The immediate backdrop for this adjustment is a year-on-year decline in global refined product exports of roughly 6 million barrels per day, or about 25%, with the Persian Gulf contributing 3.2 million barrels per day and Russia 1.1 million barrels per day, together accounting for about three-quarters of the global shortfall.

The report notes that Persian Gulf crude exports have recovered to 70%-80% of pre-war levels, but refined product exports have only bounced back to around 40%. Goldman Sachs expects global refinery utilization rates will not return to normal until the second half of 2027, meaning the structural shortage of diesel will continue to be priced in for an extended period.

Crude is back, refined products are not

Persian Gulf crude exports have recovered to 70%-80% of pre-war levels, while refined product exports remain at just about 40%.

Goldman Sachs estimates actual Persian Gulf crude exports at approximately 15-16 million barrels per day, up 5-6 million barrels per day from the March low and notably higher than real-time tanker tracking data suggests. This discrepancy stems from a growing number of tankers turning off AIS transponders and increased ship-to-ship transfers, alongside the Iran-Oman push for a temporary shipping corridor through the Strait of Hormuz and Gulf producers expanding alternative routes that bypass the strait.

Crude and refined product trends have consequently diverged: global crude exports are down only 10% year-on-year, while diesel, jet fuel, and fuel oil exports have fallen 22%, 20%, and 32%, respectively. Price performance tells the same story, with diesel margins up 225% year-on-year and jet fuel up 234%, versus just 34% for crude.

Goldman Sachs believes that rising "dark fleet" supply and ongoing alternative route development may cap upside for crude prices, even if Middle East supply disruptions persist.

Global refined product exports have fallen by roughly 6 million barrels per day year-on-year, or about 25%, with the Persian Gulf and Russia collectively contributing about three-quarters of the decline. Attacks on Russian refineries have triggered restrictions on gasoline and diesel exports, Middle Eastern refineries remain damaged, and shipping routes through the Strait of Hormuz and the Red Sea continue to face disruption.

Goldman Sachs argues that crude can reroute, but refineries cannot be relocated, which marks the fundamental difference between this shortage and previous crude supply shocks.

Refining bottlenecks lock in prolonged high margins

Supply-side recovery will take time. Global refinery outages are running about 60% above seasonal norms, and Goldman Sachs estimates global refining throughput is down nearly 7 million barrels per day year-on-year. Spare capacity is scarce: US refineries are running near full utilization, Asian refineries face crude supply constraints, and new capacity additions are insufficient to offset persistent outages.

Six months of supply shortfall have begun to erode inventories, with US diesel and gasoline stocks down 9% and 7% year-on-year, respectively. Since February, diesel has accounted for more than 40% of the $40 per barrel gain in global refined product prices, prompting Goldman Sachs to sharply revise its forecasts. The bank expects global refinery utilization will not return to seasonal norms until the second half of 2027, and new capacity will not be enough to close the gap.

Additionally, the report notes that time-charter rates for May 2027 voyages from the Persian Gulf to China have surged about fivefold within a month, signaling that shipping markets are not pricing in a rapid return to normalcy.